Investment Guru Richard Buxton: Relaxed in His London Oasis
Only a select few UK investment managers have successfully managed investors’ money for over three decades. Many have fallen by the wayside, unable to weather the market’s challenges and the resulting reputational damage. Last year, a survey revealed that a mere four managers had stayed at the helm for more than 30 years. Richard Buxton’s remarkable career longevity is worthy of admiration; after 40 years of skillfully managing funds, he has recently retired with an unblemished reputation.
Buxton’s pursuit of financial success for investors began in the early 1980s, as he embarked on a career spanning institutions such as Brown Shipley, Baring Asset Management, Schroders, Old Mutual, Merian, and Jupiter. While analyzing his 40-year investment record would be impossible due to a lack of data, fund scrutineer Trustnet reports that over the past 21 years, he has achieved an annual total return of 7.7% for investors. This surpasses the average annual return of his peer group, which stands at 6.5%.
Let’s dive into Buxton’s intriguing perspectives on investing, politicians, and the colorful characters he’s encountered throughout his extensive career.
The UK Stock Market’s State
According to Buxton, the UK stock market has lost much of its appeal in recent times and urgently needs revitalization, despite still being a profitable venture for astute investors. He recalls the vibrant stock market of his early career, with an ample equity savings pool consisting of shares held by insurance companies and defined benefit-based company pension schemes. UK companies actively raised capital and acquired overseas businesses.
However, Buxton argues that a “holy trinity” of accountants, actuaries, and regulators has decimated this pool over the years. The process began when Gordon Brown, in his role as Chancellor of the Exchequer in the Labour Government of 1997, eliminated the tax credit on dividends. Overnight, this move reduced the income received by company pension schemes from share dividends by a quarter, significantly impacting their financial health and leading to many scheme closures.
Buxton asserts that subsequent regulatory interventions have worsened these issues. For instance, companies were required to include pension fund deficits on their balance sheets, prompting many schemes to move away from equities and towards bonds in an attempt to de-risk their portfolios. At the start of the 2000s, UK pension schemes had 50% of their assets invested in equities, but today that percentage has dropped to a mere four.
As a consequence, Buxton laments the absence of a natural investor base in the UK and highlights the importance of a thriving equity market in supporting economic activity. Additionally, the stock market has been diminished further by overseas companies and private equity firms buying up listed UK businesses. Just last week, top banker David Livingstone from Citi warned of the UK stock market’s potential downturn, referring to it as a “doom loop.”
Buxton supports the Tony Blair Institute’s proposals for utilizing company pension assets to breathe new life into the equity market and stimulate economic growth. The scheme involves consolidating various pension schemes into “superfunds” and mandating that a quarter of their assets be invested in UK-listed companies, which are currently starved of long-term capital. He sees this as the ultimate solution to reinvigorating capital markets and commends both Sir Keir Starmer and Shadow Chancellor of the Exchequer Rachel Reeves for their understanding of its importance.
Beyond this overhaul, Buxton believes that pension saving for UK workers should be compulsory, with a minimum contribution set above 15% of salary. Currently, under auto-enrollment, the minimum contribution stands at a mere 8%. Buxton emphasizes the need for long-term thinking when it comes to investing and advises against panic selling during market downturns. He also dismisses the notion of attempting to time the markets, asserting that it’s a futile pursuit. Instead, he recommends backing businesses with strong balance sheets and talented managers and holding investments for the long term.
The Admirable Thatcher and UK Politics
Although Buxton claims not to align himself with any political party, he holds a strong belief that the Conservatives have failed the country over the past 13 years and that change is desperately needed. However, he reserves admiration for one Tory figure: Margaret Thatcher. As a student during the 1970s, Buxton witnessed a UK ravaged by power strikes and the three-day working week. Thatcher’s leadership from 1979 onward transformed the country’s economy. Buxton credits her with restoring the market’s prominence, curbing the power of unions, and reviving a struggling nation.
While acknowledging the successes of her early privatisations, such as BP and British Gas, Buxton acknowledges that later privatizations, namely water and rail companies, have not fared as well. When asked about Brexit’s impact on the UK, Buxton points to the weaker pound as evidence of the damage inflicted upon the country.
Life After Retirement
Buxton chose to retire ahead of his 60th birthday, citing the exhausting nature of working in the city. His daily routine would begin at the crack of dawn, five days a week. Regarding his final days at Jupiter, Buxton explains that since the company allowed employees to work remotely in August, his last day in the office was on July 31. It was a quiet farewell stage left.
When asked about fund managers he admires who are currently handling investments for UK investors, Buxton names Ed Meier (his successor on Jupiter UK Alpha), Adrian Frost (Artemis Income), and Alex Savvides (JOHCM UK Dynamic).
The discussion turns to Neil Woodford’s Equity Income controversy and whether it has cast a cloud over the industry. Buxton acknowledges that it was unhelpful and highlights the need for tighter oversight and governance to prevent such incidents in the future.
In terms of personal preferences, Buxton favors opera and theater over sports, and he enjoys cooking for a quiet evening in. When asked to choose between Venice and Rome, he fondly recalls getting married in Venice. As for the current political landscape, Buxton refrains from endorsing a specific candidate, stating that he has always admired Mrs. Thatcher.
In conclusion, Buxton emphasizes the urgent need for change and his hope that UK equities regain vitality. He believes in the transformative power of compulsory pension contributions and the positive impact such a policy could have on the economy. With the potential for Labour to be in power for the next decade, he urges them to be brave enough to enact this important change.
Though his time in the City has come to an end, Buxton leaves behind a wealth of investment wisdom garnered from four decades in the industry. His retirement marks the end of an era, but his contributions to the financial world will not be forgotten.
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